Lean and FIT Avoids Boom and Bust

Release Date: 31/10/2011

Griff Thomas, Technical Manager for Renewables, suggests that the change in the tariff
makes long-term sustainable sense for installers.

Today’s proposed changes in reduced Feed In Tariff (FIT) payments from next month should provide installers with a long-term sustainable future in the renewables industry rather than encouraging a ‘gold rush’ or ‘get rich quick’ approach to green energy.

This morning (Monday) Greg Barker, Minister of State for Climate Change, outlined a consultation process that seeks to halve future payments, reducing from 43.3p to 21p for systems up to 4kW. The changes would affect all new installations from 12th December 2011.

Brought in April 2009, Feed in Tariffs were always only intended to kick-start the renewable technology industry, rather than provide an indefinite ‘financial crutch’. The strategy has been more than successful. Since then, the UK has seen over 80,000 installations and 250Mw of capacity added to its renewable energy generation output. A review was planned for April 2012 but the rampant and runaway enthusiasm for the scheme has meant that action needed to take place sooner rather than later.

Many had already begun to question whether their continued use of high FITs could be viewed as fair and equitable. Our view is that while the scheme continues to offer generous payments, the cost of panels and inverters has fallen dramatically, somewhere between 30-70%, and this provided the financial context for earlier than planned cuts in the tariff payments available.

Far from killing off the scheme, the Minister has made clear that an industry based on large incentives runs the risk of a ‘boom and bust’ economic cycle. In this instance, we agree with the Government position of getting the balance right and providing the foundations for a sustainable renewable industry for the long-term.
At ELECSA, we believe that a cut in the Feed in Tariff can be afforded without damaging future prospects. The up till now generous FIT payments have served their purpose in getting renewable technologies more widely understood and accepted and it has outperformed all expectations. If the tariffs had continued at the higher rates, there would have been the risk of the market adopting a ‘gold rush’ mentality that would have ultimately led to the demise of the industry which clearly benefits no-one.

So whilst FITs may be reduced in the future, the returns will still be there for customers looking to invest in solar PV and so it will remain a growth market, along with other renewable technologies.

We are awaiting the announcement of the new date for the commencement of the commercial Renewable Heat Incentive (RHI) to encourage uptake in this area and other upcoming initiatives such as the Green Deal are likely to include renewable technologies ensuring that householders take a whole house approach to their energy use.

ELECSA is in no doubt renewables are here to stay as the early demand for FITs has proven. With Solar PV installers can still look to benefit from continued consumer demand as householders look to take more control of their outgoings rather than rely upon the global price of fuel on the wholesale energy markets. As an organisation established by electricians for electricians, we will continue to support and advise contractors looking to move into the renewables sector as it will remain an important stream of new income opportunities for years to come.